BEIJING • It has been 11 weeks since Lai Xiaomin, the man once known as the God of Wealth, was executed on the morning of Jan 29 in the northern Chinese city of Tianjin.
But his shadow still hangs over one of the most dramatic corruption stories ever to come out of China - a tale that has now set nerves on edge around the financial world.
At its centre is China Huarong Asset Management, the state financial company that Lai lorded over as chairman until he was ensnared in a sweeping crackdown on corruption by Chinese President Xi Jinping.
From Hong Kong to London to New York, questions burn.
Will the Chinese government stand behind the US$23.2 billion (S$31 billion) that Lai borrowed on overseas markets - or will international bond investors have to swallow losses? Are key state-owned enterprises like Huarong still too big to fail, as global finance has long assumed - or will these companies be allowed to stumble, just like anyone else?
The answers will have huge implications for China and markets across Asia. Should Huarong fail to pay back its debts in full, this would cast doubt over a core tenet of Chinese investment: the assumed government backing for important state-owned enterprises, or SOEs.
"A default at a central state-owned company like Huarong is unprecedented," said Mr Owen Gallimore, head of credit strategy at Australia and New Zealand Banking Group. Should one occur, he said, it would mark "a watershed moment" for Chinese and Asian credit markets.
Huarong bonds - among the most widely held SOE debt globally - recently fell to a record low of about 52 US cents on the US dollar.
Fears of a near-term default eased on Thursday after the company was said to have prepared funds for full repayment of a $600 million offshore bond due on April 27. It plans to pay on the due date, according to a person familiar with the matter, who asked not to be named discussing private information.
However, that is a drop in the ocean and will not remove investor concerns. All told, Huarong owes bond holders at home and abroad the equivalent of US$42 billion. About US$17.1 billion of that is due by the end of next year, according to Bloomberg-compiled data.
Ironically, Huarong was created in the aftermath of the 1990s Asian collapse to contain a swelling wave of bad loans threatening Chinese banks. It was to serve as a "bad bank", a safe repository for the billions in souring loans made to state companies.
After Lai took over in 2012, Huarong reached for more, pushing into investment banking, trusts, real estate and positioning itself as a key player in China's US$54 trillion financial industry.
Before long, global banks came knocking. Lai had no trouble financing his grand ambitions. A big reason: Everyone thought Beijing would always stand behind a key company like Huarong.
Lai was arrested in 2018, and in January this year, he was found guilty of accepting US$277 million in bribes between 2008 and 2018. He was put to death three weeks later - a rare use of capital punishment for economic crimes.
Some took the execution as a message from President Xi: My crackdown on corruption will roll on.
On Thursday, China's financial regulator said operations at Huarong are normal and the company has ample liquidity, marking the first official comments aimed at easing investor concerns over the financial health of the nation's largest bad-debt manager.
The company is actively cooperating with its auditor and will complete its annual report as soon as possible, the China Banking and Insurance Regulatory Commission said in a statement.
Huarong's dollar bonds climbed, extending their rally from record lows on Thursday.
The company and its subsidiaries need to repay or refinance about US$7.4 billion in local and offshore bonds this year. The company counts equity firm Warburg Pincus, Goldman Sachs Group and Malaysia's sovereign wealth fund among its shareholders, according to data compiled by Bloomberg.